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Coast Guard blames Shell for beached Arctic drill rig

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Sarah Gilman | Apr 08, 2014 12:35 PM

On New Year’s Eve, 2012, Royal Dutch Shell’s Kulluk drilling platform ran aground off a southern Alaskan island called Sitkalidak. Last week, the U.S. Coast Guard released a 152-page report dissecting the incident in minute detail and squarely pinning the blame on the oil company and its contractors.

The company had used the Kulluk – a 266-foot wide, conical-hulled drilling vessel completed in 1983 – for exploratory drilling off Alaska’s north coast that fall, then hitched it to a specialized ship called the Aiviq and sent it on Dec. 21 towards a Seattle shipyard for the winter. On the 1,700-mile journey along the coast from Captain’s Bay in the Aleutians, the two vessels were beset by a brutal, multi-day storm in the Gulf of Alaska, with up to 50-knot winds and 25-foot seas. On the 27th, the towline broke loose, and shortly after the crew managed to hook up an emergency line, the Aiviq’s engines failed.

A Coast Guard vessel soon arrived and tried to tow the Aiviq, still attached to the Kulluk, but its line snapped too. A second ship attempted to tow the Kulluk side-by-side with the Aiviq, during which the Coast Guard managed to helicopter evacuate the Kulluk’s 18 crewmembers, but then both towlines snapped. A tugboat then managed to establish an emergency towline on the 30th, allowing the Aiviq to get a line back on the rig on the 31st, only to lose it yet again. As the seas’ heaving worsened, the Coast Guard ordered the tugboat to cut the rig loose for the safety of its crew.

Kulluk aground
Rear Admiral Thomas Ostebo surveys the grounded Kulluk drilling platform. Courtesy U.S. Coast Guard.

Though no one was hurt, and the Kulluk’s 139,000 gallons of diesel and 12,000 gallons of combined lubrication oil and hydraulic fluid stayed securely onboard, the incident added credence to environmentalist contentions that neither industry, nor the federal government, is ready for the risks of developing oil reserves beneath the harsh Arctic Ocean farther north.

"The most significant factor (contributing to the accident) was the decision to attempt the voyage during the winter in the unique and challenging operating environment of Alaska," wrote Coast Guard Seventeenth District Commander Rear Admiral Thomas Ostebo, “demonstrating a lack of respect” for the challenging environment with an “inadequate determination of risk” and “ineffective risk management.” Worse, the company made the decision to move the rig to Seattle in part to avoid a multi-million dollar state tax bill, which would have been assessed Jan. 1 had it stayed in Alaskan waters.

Some of the report’s other findings:

-The Aiviq had had problems towing the Kulluk earlier that fall, including taking on water that damaged numerous systems and an electrical blackout that made the engine inoperable. Neither incident was reported to the Coast Guard, as required. The vessel may also have had ongoing incursion of seawater into its fuel oil, contributing to engine failure. All of this made it a questionable choice for a lone towboat.

-Shell’s operation’s manager was on vacation during the final tow planning process and the tow itself, leaving an employee who had been on staff for 6 months, hadn’t participated in any of the planning meetings, and had not received specialized training or even instructions from his supervisor, to sign off on the enterprise. “There is also no evidence that the plan was forwarded to any other federal or state entities for review or approval,” nor do there appear to be “any federal or state requirements to review or approve such plans.” Meanwhile, the crew was not especially experienced with towing in Alaska’s wintertime waters. The company’s contingency plans were also found to be inadequate.

-The Kulluk’s shape made it particularly vulnerable to rolling, dragging, and sudden accelerations in heaving seas, and its tall profile, to the grasp of high winds – swinging out from the side of the tow vessel like a “balloon on a string.” The tow configuration also allowed it to twist. With the violence of the storm, all of this added up to massive extra strain on towlines and other equipment, for both the Aiviq and the boats that came to its aid; none, including the Aiviq, had strong enough equipment to hold the rig under those conditions (which can be anticipated in the Gulf of Alaska, where winter storms are regular and violent).

-No complete assessment of the towing gear was conducted prior to the Aiviq’s departure.

“Shell ran through every single safety and common sense red light in moving this rig because of financial considerations,” Sen. Ed Markey, D-Mass., told the news website Fuel Fix. “This kind of behavior should raise major red flags for any future Arctic drilling plans.”

Three ship tow
Three ships tow the Kulluk from Kiliuda Bay near Kodiak Island, Alaska, Feb. 26, 2013. Courtesy U.S. Department of Defense.

Except there now aren’t any plans on the immediate horizon in U.S. waters, and it’s looking increasingly unlikely that any will get underway at a significant scale for years, thanks in part to incidents like the Kulluk.

It was just one in a string of mishaps to plague Shell’s Arctic program in 2012, leading it to call off activities in 2013. ConocoPhillips shelved its own plans last April in the wake of the Interior Department’s Kulluk investigation. And after a federal appeals court ruled that the environmental analysis underpinning the original 2008 sale of Arctic Ocean leases to Shell and ConocoPhillips was inadequate late this January, Shell suspended its 2014 drilling program as well.

The international picture is similar, according to Bloomberg News. “Off the coast of Greenland, drilling has yet to resume after Cairn Energy spent $1 billion on exploration without making commercial finds in iceberg-ridden waters,” writes Bloomberg’s Mikael Holter and Niklas Magnusson, “while Russia’s Shtokman gas project, 370 miles from shore in the Barents Sea, has been stalled for years.”

“I don’t think we’ll see any oil production in the Arctic any time soon — probably not this decade and not the next,” Lundin Petroleum’s Ian Lundin, whose Sweden-based company operates in Norway, told Bloomberg in February. “The commercial challenges are too big.”

The biggest multinational oil companies may actually be rethinking mega-projects like Arctic drilling in general, at least in the short term, according to Petroleum Economist, since they’re currently spending out the nose just to keep production from declining:

ExxonMobil, Shell, Chevron and BP spent a staggering $686 billion from 2008 to 2013, with annual investment levels rising by about 50% over the same period…(Their) executives told investors that the increased spending would unlock new supplies and profits, but (their) total oil and gas production actually fell more than 3% (over the same period).

Some analysts believe this means the ground beneath the energy status quo is getting shakier. “The oil industry has faced more Black Swans since 2012 than perhaps any other time in its history, not only from geopolitical and severe weather events, but also from disruptive technologies,” Executive Director for Energy and Sustainability at the University of California, Davis Amy Myers Jaffe writes for Fuel Fix. “BP in its 2013 World Energy Outlook acknowledged the high likelihood that oil demand in the industrial economies has peaked. (It) also opened the door to the idea that exponential growth in oil demand in China might fail to materialize … and cited tremendous gains in energy efficiency, changing (transportation) patterns and a rise in shale gas and renewables as curbing the world’s future thirst for oil.”

Myers also notes that the tech boom still has plenty of techtonic shifts in store for the energy industry. “That change is likely to be faster and more transformational than most senior oil industry executives care to admit.”

Sarah Gilman is the associate editor of High Country News. She tweets @Sarah_Gilman.

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